Top US angel sings Scots' praises

Published on Wednesday 21 November 2007 01:00

SHE is one of the leading authorities on small-scale investment and heads the world's leading business angel community.

And Marianne Hudson, head of the US Angel Capital Association, says she is bowled over by the way Scotland's business angel investment market is punching above its weight.

In Edinburgh to meet senior policy makers, individual investors and Scotland's own business angel network, LINC, en route to Geneva for a worldwide angel investment conference, Hudson admits her US network could learn one or two things from its Scottish counterparts.

Unlike venture capitalists, who usually deal with larger investments, business angels - such as Perth-based group Braveheart - invest their own money, in relatively small-scale deals, in promising start-up companies, usually in exchange for convertible debt or ownership equity. The angels make money, not from managing the process of investment and getting fees out of it but from the investments themselves.

A long-established practice in the States, the concept has been slower to take off in Europe with Scotland leading the way. Official statistics show that Scotland boasts 25 per cent of all of the business angel investments in the UK.

And while the average deal in England is only 150,000, Scotland's figure is double that, with some individual investments reaching as high as 2 million.

Hudson says: "Mostly, I have been impressed by the similarities between the network in Scotland and in the States. The angels in Scotland are all about building great companies. They are definitely looking for returns, but it is also about the companies themselves."

But unlike their US counterparts, Scottish angels have strong support from the government, through schemes such as tax benefits for individual investors.

Hudson adds: "The investment size sounds like it is a little larger than in the States. What is different is that you have more of a partnership with the government. Part of that is definitely a cultural thing - and there are some really interesting government initiatives to support the angels and the companies they invest in.

"However, our economy is much more like Scotland's than you might think. There's a feeling here that California and Boston are a representation of the whole of the US, but there are a lot of places in the US that are much more rural."

Due to accompany Hudson to Geneva to sing the praises of Scotland's angel network to a European audience this week, LINC director David Grahame is also keen to learn from the differences in the US, but is proud of Scotland's achievements.

He says: "It's partly that the small community makes it easier to build networks. There's also a strong Scottish identity emerging at the moment and the drive to do things. But, because we are too small to sustain any size of venture capitalists firms in Scotland, if the angels don't step up to fill the gap, who will?"

He adds: "I think we're one turn of the wheel behind America. A much higher proportion of Marianne's members are cash-down entrepreneurs. We have a lot of money from big corporates or old money - probably around 75 per cent."

Hudson notes: "Two thirds of our members are self-made entrepreneurs. Almost never would it be old money.

"This kind of investing wouldn't appeal to people with old money, unlike in Scotland."

And the two angel network leaders are united about one thing - their dislike of investment reality TV programmes such as Dragon's Den. Both have been approached by TV producers looking for "dragons" to appear on their shows - and both have refused.

"We hate them," laughs Grahame. "Business angels are not aggressive like you see on the TV - if you're going to invest in one of these businesses, you have to live together for the next six years - although it has lifted awareness of the industry."